ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If consumers like a good less over time, demand decreases. If the price of a good increases, this will increase demand for a substitute good. If the price of Coca Cola increases, for example, the demand for Pepsi Cola will increase.

Detailed explanation-2: -So, when the price of Pepsi increases, the demand for Coke increases, and when the price of Pepsi decreases, the demand for coke decreases. So when the price of pepsi increases, consumers will substitute Pepsi with coke, thus the demand for coke will increase.

Detailed explanation-3: -A cross-price elasticity of 0.63 implies that a 1% increase in the price of Pepsi would increase the quantity of Coke demanded by 0.63%. Therefore, a 5% increase in the price of Pepsi would increase the quantity of Coke demanded by five times as much, that is, by 5 x 0.63% = 3.15%.

Detailed explanation-4: -If the price of Pepsi decreases relative to the price of Coke and 7-up, the demand for Coke and 7-up will increase. Law of demand states that when price increases, the demand for the commodity falls and when price decreases, the demand for the commodity rises.

Detailed explanation-5: -The cola wars are the long-time rivalry between soft drink producers The Coca-Cola Company and PepsiCo, who have engaged in mutually-targeted marketing campaigns for the direct competition between each company’s product lines, especially their flagship colas, Coca-Cola and Pepsi.